License season in full swing
Frontier drilling is set for a flourish in northern Europe, following a series of license awards off Ireland and the Faroes. Norway, meantime, is opening up new North Sea acreage, as it bids to step up the pace of exploration.
In January, the Faroese Petroleum Administration announced the winners of its second licensing round. A sluggish response was expected after the results of the First round wells - only one discovery, and of dubious value - but ChevronTexaco lit a fuse last summer, finding oil and gas with its first well in UK deepwater block 213/27, midway between the Shetlands and the Faroe Islands. The 500-MMbbl Rosebank/Lochnagar prospect will be appraised with further wells later this year.
New offshore block awards under the Faroe Islands� 2nd licensing round.
Not surprisingly, ChevronTexaco picked up five blocks as operator on the Faroese side of the median line, covering 686 sq km. The partners are the same combination involved in Rosebank/Lochnagar: Statoil, Dong, and OMV. Statoil was more successful in volume terms, gaining operatorship of three Faroese licenses comprising 24 full and six part-blocks. The other new operators are Geysir (Licenses 013 and 014) and Foroya Kolvetni (012).
License terms vary from three to eight years, with intermediate points when groups must decide whether to take their programs forward or relinquish the acreage. Aside from seismic acquisition and processing commitments, two of the licenses stipulate exploration drilling in a future phase.
Off northwest Ireland, Lundin Exploration, which won a new frontier exploration license, heads a five-strong partnership. The 408 sq km acreage includes blocks 13/7 and part-blocks 13/11 and 13/12 and lies 70-km offshore Donegal. The group held a licensing option over this area and has completed a technical evaluation exercise. The largest identified structure, named Inishberg, will be drilled some time this year, targeting Triassic Sherwood sandstone. Water depth is around 320 ft.
Farther south in the Porcupine basin, Irish independent Providence Resources has secured two frontier licenses in partnership with Sosina Exploration. One of these is believed to contain two undeveloped oil and gas-condensate fields discovered by Phillips in the 1980s. Ireland’s Ministry for Communications, Marine, and Natural Resources has also invited bids for further frontier licenses in the Slyne, Erris, and Donegal basins.
At the end of January, Norway’s government announced that 192 blocks or part-blocks will be available under the country’s latest pre-defined area round (APA 2005). This represents an increase of 41 blocks or part-blocks over 2004’s offer. Most of the acreage lies in mature parts of the North Sea and the less-developed Norwegian Sea. Applications are due Sept. 30, with awards scheduled for December.
According to Petroleum and Energy Minister Thorhild Widvey, the government expects an upsurge in Norwegian exploration following last year’s modest tally of 17 wells. She also promoted new activity close to long-established platforms and pipelines, saving these structures from early retirement.
Talisman Energy’s CEO Jim Buckee believes the Norwegian sector is less mature than the UK, but his company’s specialty is growth through acquisition. Its latest purchase involved an agreed $155-million purchase of Pertra from PGS. The deal brings Talisman 70% interest and operatorship of the Varg oilfield and the undeveloped South Varg gas-condensate discovery, an 80% operating position in three exploration blocks (license PL321), and 30% of five other blocks in PL316. Talisman entered the sector two years ago through buying 61% of BP’s Gyda field and production facilities. Varg is a complex field that will initially net Talisman 10,000 b/d. It plans to mobilize a rig to Varg shortly.
Unocal’s shallow gas plan
Unocal is looking to develop several shallow-lying gas reservoirs in the Dutch North Sea with a series of new platforms. The fields are strung out among blocks A/12a, A/18a, A12b-B/10a, B/13a, and B/16a, and were originally discovered by leading Dutch sector operator NAM. Last September, NAM agreed to sell its 45% interests in these blocks to Unocal and Dyas, and a development plan was submitted last November. Early in February, however, government approval for the scheme - known as the A&B Shallow Gas project - was still pending, as were agreements concerning gas sales and pipeline transportation. State company Energie Beheer Nederland, a 50% partner in the blocks, also had to signal its assent.
According to analysts Wood Mackenzie, the subsurface depth of the reservoirs varies from 350 to 800 m, which presents challenges in terms of low reservoir pressures (30-60 bar) and unconsolidated sands. Unocal’s plan involves initial development of three of the larger fields using a central processing platform (CPP). Other fields will be brought onstream in later phases via wellhead platforms linked to the CPP. One option for export is a spur line linking the CPP into the A/6-F3-Nogat trunkline. The partners may also seek to appraise discoveries in B/10-A and B/16-A, for possible future development.
UK production decline slowing
UK North Sea production is declining more slowly than expected and exploration is picking up after a recent dip. These are two of several positive trends picked up by the UK Offshore Operators Association (UKOOA) in its latest review of activity on the UK shelf. Last year, UKCS fields mustered an average total output of 3.8 MMboe/d, compared with 4 MMboe in 2003, and production over the year totaled 1.4 Bboe. This figure is 4% above UKOOA’s best projections of a year ago. The outlook for 2005 is not bad either, with a forecast daily average of 3.6 MMboe.
In 2004, the industry spent £4 billion on UKCS exploration and development and £5 billion on field operations. Total investments could rise slightly to £9.2 billion in 2005. Operating expenditure between now and 2010 is estimated at £34-35 billion, which suggests that companies have to put more in to pull out less for production. On the plus side, there was a notable surge in development in the second half of last year, and the total number of exploration and appraisal wells, including sidetracks, was 63, the highest number on the UKCS since 1998. This year’s aggregate could rise above 70, with a potential overall outlay of £550 million.
Development drilling is heading the other direction - 166 wells including sidetracks on the shelf last year, against 204 in 2003. But over the same period, capital spending on development drilling rose 18% to £2.5 billion/yr, reflecting increased use of mobile rigs as opposed to platform-based drilling, and implementation of more expensive techniques such as multilaterals. At the same time, the new oil and gas fields coming onstream are smaller in size, requiring fewer, but more efficient, development wells.
UKOOA’s best estimate is that 28 Bboe remain to be exploited if the industry has the will. Much of the industry’s short-term focus is on producing brownfield reserves of 2.5-5.5 Bboe.
